The central bank has raised the repo rate to 7.25 per cent but left the reverse repo and bank rates unchanged at 6 per cent.
Eight top bankers in the country and Vinod Rai, secretary, financial sector, brainstormed the impact of the credit policy at a Business Standard Round Table in Mumbai on Wednesday.
OP Bhatt, chairman, State Bank of India, said the current rate of credit growth was not sustainable for the fourth year in a row and liquidity in the banking system was meant for sectors like exports, infrastructure and capital expenditure in the manufacturing sector. "The policy says if you have money, lend. If you come to me, liquidity will be expensive," Bhatt said, but stressed "at the moment, rates will not be raised".
KV Kamath, MD and CEO, ICICI Bank, also said rates would remain stable for the time being and there was no signal from the market on rates going up. "Interest rates will remain stable for the time being," he said.
Naina Lal Kidwai, country head (India), HSBC, said the bank was following a wait and watch policy over the next quarter. Credit offtake, liquidity and inflation will be the deciding factors.
VP Shetty, chairman of IDBI, felt that in the short term, rates would go up in the aftermath of the repo rate hike although the stable interest rate environment would not be disturbed in the longer term.
Bank of Baroda Chairman Anil Khandelwal said his bank, as of now, had no proposal to hike interest rates. "It is only a last resort," he said.
MBN Rao, chairman, Canara Bank, said the signal was regarding the process and composition of resources. The current rates would continue.
Citigroup India CEO Sanjay Nayar's was the lone voice that emphasised on the fact that the liquidity would dry out, choking credit growth and leading to a hike in interest rates. "Rates will harden," he said.
Vinod Rai said banks would have to take a close, hard look at their assets. "If they need to grow their loan book, they should decide at what cost," he added.
None of the bankers participating in the discussion felt there would be any drastic slowing down of credit growth, even as they felt that very high growth momentum might not be maintained.
Some of the bankers present there indicated that in their annual business budget, the target for annual credit growth had already been brought down to 20 per cent while others said growth would veer around 25 per cent. Non-food credit growth was 30.5 per cent year on year till mid-October on top of 31.8 per cent growth a year ago.
